Mortgage interest relief

Landlords who receive tax relief for finance costs on residential properties are now restricted to the basic rate of income tax.

The change, which is being phased in gradually since April 2017, will restrict deductions from property income for finance costs, including mortgage interests, interest on loans, buying furnishings and fees incurred when repaying mortgages.

Individuals are able to claim a basic-rate reduction of up to 20% on excess finance costs on or after 6 April 2017.

Percentage of costs deducted from profits

Percentage of costs available as a basic rate deduction

Tax year

75%

25%

2017/18

50%

50%

2018/19

25%

75%

2019/20

0%

100%

2020/21

The above changes to mortgage interest relief will have a significant impact over the affordability/viability of owning rental property going forward.

Allowable expenses

You can deduct allowable expenses if they are solely for the purposes of renting out your property.

Allowable expenses include day-to-day running costs of the property, such as maintenance and repairs.